TMI Blog2013 (7) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... endments in the Schedule-II to the SEZ Act is made by the Ministry of Finance, Government of India through a money bill - Held that:- Government of India (Allocation of Business) Rules are not applicable to the proceedings and the business of parliament - These Rules are only applicable to the Government of India and not to the Parliament - A perusal of the Rules of Loksabha do not bar the Finance Minister from moving a bill for amendment to SEZ Act - reading of the Rules specifies that Finance Minister includes any minister and as such he is competent to move a bill seeking amendment of SEZ Act which comes under the domain of Ministry of Commerce - Following the decision of Madurai District Central Cooperative Bank Ltd. vs. Third ITO [1975 (7) TMI 4 - SUPREME Court] - Deceided in against assessee. Removal of exemption to SEZ units - amendments violation of Article 14 - Held that:- It is settled position of law that every tax exemption and incentive shall have a sunset clause - In the instant case by introducing sub-section 6 to Section 115JB and sub-section 6 to Section 115O of Income Tax Act a permanent exemption was given to SEZ establishments/units - Realizing this lapse on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mechanism and package of incentives to attract foreign and domestic investments for promoting export lead growth. The scheme was implemented through various notifications and circulars issued by the concerned ministries/departments from time to time. This system of issuing notifications and circulars resulted in certain practical problems and does not lend enough confidence among the investors. In order to overcome the problems of the present scheme and to give a long term and stable policy frame work the Central Act for Special Economic Zones had been found necessary. Accordingly the Special Economic Zone Bill was introduced in the parliament. The Bill was passed in the Loksabha on 09.05.2005 and in Rajyasabha on 11.05.2005. The President of India gave his assent to the Bill on 23.06.2005. Thus the Special Economic Zones Act, 2005 (for short SEZ Act ) came into force. Section 7 of the SEZ Act specifies that any goods or services exported or imported from the domestic tariff area by any unit in a special economic zone shall be exempted from payment of taxes, duties or cess subject to prescribed terms, conditions and limitations. Section 26 of the SEZ Act specifies certain concess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or after 1st April, 2005 out of its current income. Such distributed income was also exempt from tax under sub-section (34) of Section 10 of the IT Act. 3. Petitioners are SEZ developers/co-developers/units. The petitioners by taking necessary permissions and approvals under the SEZ Act and Rules are carrying on activities inside the SEZ. The petitioners contend by acting on the promises made under the provisions of SEZ Act, Rules and exemptions provided under various Acts including the Income Tax Act made huge investments in establishing the SEZ units. It is contended that petitioners borrowed massive loans from various financial institutions and investment on land, buildings, infrastructure facilities etc. Petitioners have commenced their projects on the basis that income accrued or arising from business carried on by them as SEZ developer or unit are exempted from applicability of Minimum Alternate Tax (MAT) as provided under sub-section 6 of Section 115 JB and sub-section 6 of Section 115-O of the Income Tax Act. 4. When the matter stood at that stage, the Union Finance Minister moved the Union Budget for 2011-2012 on the floor of Parliament and the Finance Bill, 2011 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners from the applicability of payment of MAT and under sub-section 6 of Section 115-O the Payment of tax on dividend distribution. On the basis of this promise made by the Government the petitioners invested and established units by the borrowing massive loans. The proposed amendments are therefore opposed to Doctrine of Promissory Estoppel. It is contended that when the petitioners made investments, they legitimately expected that the exemptions provided under Section 115-JB and 115-O will be continued. Now abruptly, arbitrarily, unfairly and to the detriment of the petitioners the impugned amendments are brought in and as such the same is opposed to the Doctrine of Legitimate Expectation. The impugned amendments are opposed to the very object of SEZ Act. Therefore, the impugned amendments to the SEZ Act are unconstitutional, beyond the power and authority and administrative competence of Ministry of Finance. The impugned amendment is contrary to Section 27 of the SEZ Act. Section 27 of SEZ Act empowers the parliament to modify the provisions of Income Tax Act. But under the impugned amendments the Parliament amended Schedule-II to the SEZ Act and as such the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The task of the courts is to interpret the laws and to adjudicate about their validity. It is in this back ground the Supreme Court in State of A.P. vs. Mcdowell and Co. [AIR 1996 SC 1627] held that a law made by the Parliament or the Legislature can be struck down by courts on two grounds and two grounds alone, viz., (1) lack of legislative competence and (2) violation of any of the fundamental rights guaranteed in Part-III of the Constitution or of any other constitutional provision. There is no third ground. Further the Supreme Court in Government of A.P. vs. Smt. P.Lakshmidevi [AIR 2008 SC 1640] held that the constitutional courts do have the power to declare a law to be invalid. Invalidating a statute is a grave step and must therefore be taken in very rare and exceptional circumstances. The court must not invalidate a statute lightly, for invalidation of a statute made by the legislature elected by the people is a grave step. The legislature must be given freedom to do experimentations in exercising its powers, provided of course it does not clearly and flagrantly violate its constitutional limits. All decisions in the economic and social spheres are essentially ad hoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners are not applicable to the proceedings and the business of parliament. These Rules are only applicable to the Government of India and not to the Parliament. The proceedings and the business of the parliament is governed by Rules of Procedure and Conduct of Business in the Lok Sabha (for short Rules of Loksabha ). Chapter-I , Rule 2(1) of Rules of Loksabha defines Finance Minister includes any Minister. Further Member incharge of the Bill means the Member who has introduced the Bill and every Minister in the case of Government Bill. Minister means a member of the Council of Ministers and includes a member of the Cabinet, a Minister of State, a Deputy Minister or a Parliamentary Secretary. Further the Rules of Loksabha provides for Government bill and private members bill. A perusal of the Rules of Loksabha do not bar the Finance Minister from moving a bill for amendment to SEZ Act. On the other hand, a reading of the Rules specifies that Finance Minister includes any minister and as such he is competent to move a bill seeking amendment of SEZ Act which comes under the domain of Ministry of Commerce. Therefore, I decline to accept the contention of learned counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 115O of Income Tax Act a permanent exemption was given to SEZ establishments/units. It is settled principle that there can be no permanent tax exemption or incentive in fiscal legislation. Realizing this lapse on the part of the Government the impugned provisos were introduced restricting the exemption only for a particular period. In the impugned amendment it is made clear that it is prospective in nature. Therefore the impugned amendments can neither be said unreasonable or arbitrary. 14. The contention of learned counsel for the petitioners that even sunset clause must be a road map to end the tax exemption and not an abrupt end. In the instant case, the exemption was provided in the SEZ Act in the year 2005. The petitioners enjoyed this benefit for a period of five years. The impugned amendments are shown in the Finance Bill and placed before the Parliament in the month of March 2011 for the years 2011-2012. The proposed amendments specify that the MAT will come to an end from 1st April, 2012 and tax on distribution of dividends will come to an end from 1st June 2011. Thus the impugned amendments are prospective in nature. The road map is not a condition precedent for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... encroach into this field or invalidate such law. Therefore I hold point No. 2 in negative. On point no.3 and 4 17. The concept of Promissory Estoppel and Legitimate Expectancy are not defined in any law. These two concepts are fashioned by the courts while reviewing the administrative acts in the field of administrative law. The judicial pronouncements defines Promissory Estoppel means where one party has by his words written or oral or by conduct made to other a clear and unequivocal promise which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so. So also the judicial pronouncements defines Legitimate expectation means an expectation of a person from a representation or promise made by an administrative authority including an implied representation or from consistent past practice that he will be treated in certain way even though he h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Government or of the public authority to make. The doctrine of promissory estoppel being an equitable doctrine, it must yield when equity so require. If it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it. The Court would not raise an equity in favour of the person to whom the promise or representation was made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case because, on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it. In Sales Tax Officer vs. Shree Durga Oil Mills STC (vol 108) 1998 SC 274 it is held: The view taken by this Court in Kasinka's case was reiterated by a Bench of three-judges in the case of Shrijee Sales Corporation Anr. Vs. Union of India (1997) 3 SCC 398. It was laid down in that case that the determination of applicability of promissory estoppel against the Government hinges upon balance o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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